Question
Expected return of a portfolio using beta . The beta of four stocksG, H, I, and Jare 0.43, 0.75, 1.08, and 1.65, respectively and the
Expected return of a portfolio using beta.
The beta of four stocksG, H, I, and Jare 0.43, 0.75, 1.08, and 1.65, respectively and the beta of portfolio 1 is 0.98, the beta of portfolio 2 is 0.81, and the beta of portfolio 3 is 1.12.
What are the expected returns of each of the four individual assets and the three portfolios if the current SML is plotted with an intercept of 3.0% (risk-free rate) and a market premium of
10.5% (slope of the line)?
What is the expected return of stock G?
(Round to two decimal places.)
What is the expected return of stock H,I,J?
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